And this isn't some traditional HRO play, it's KPMG making a serious investment in Workday delivery across both HR and Finance & Accounting. KPMG already claims to be the transformative partner for 45% of the world's Workday financials rollouts... now it is playing with the leaders in Workday based HR delivery, namely OneSource Virtual, Deloitte, Accenture, Collaborative Solutions and Meteorix.

Does this mean KPMG is now an HR-as-a-Service Provider?

Yes it does. The firm has realized it has to be in the managed services business to support the emerging SaaS offerings across technology implementation, post go-live support, transaction business processing and higher value services, such as organizational change management, workforce analytics and ad hoc strategy needs... in an on-demand model. It also knows it needs to be in the position to provide these on-demand capabilities around several core HR SaaS product suites, notably Workday, Oracle HCM and, ultimately, SAP Successfactors.

So can KPMG lead the HR-as-a-Service market?

KPMG can certainly compete against the consultative global leaders in HR, most notably Deloitte, Accenture, IBM and Mercer, while also having serious capabilities to spar with the emerging niche service providers, especially where clients have global requirements at scale. With this Towers Watson deal, HfS estimates an additional 150 Workday specialists are being added across United States, United Kingdom, China/Hong Kong, Canada, Singapore, and the Philippines to add to KPMG's current HR practice of ~600 practitioners across 18 major global countries. This is now a serious global player, which can pivot impressively across both finance and HR domains around the leading SaaS platforms. With this deal, KPMG also assumes ownership of both the famous Towers Watson HR Service Delivery and Technology Survey and Forum, which it can quickly absorb to enhance its own brand credentials and domain leadership in HR-as-a-Service.

The Bottom-line: The ambitious consultants are moving into As-a-Service, so what are the next moves we can expect?

Accenture never veered from being a service provider, in addition to a consultant, and now reaps the rewards for dovetailing the best of both worlds - managed services, global scale and scalable skill. Deloitte, KPMG and PwC have claimed, for the last two decades, to be consultants and audit firms - and not managed services providers (even though Deloitte has always had a few discrete offerings that smell a lot like managed services).

Now, KPMG is moving into As-a-Service delivery, with a particular Workday flavor that is clearly the best starting place with the level of global demand for this offering. The next move will surely be it continuing to build a Finance-as-a-Service capability around the emerging Workday financials management suite that is attracting major interest from CIOs and CFOs.

Accenture and Deloitte will be nervously watching this move, not to mention several traditional HR service providers, such as AONHewitt and NGA, which are trying to figure out where (or whether) they truly belong in this As-a-Service business. Accenture has done an impressive job honing its HR-as-a-Service delivery around Workday and SAP Successfactors (among other SaaS offerings), while Deloitte is still clearly stalling on whether or not it is in the As-a-Service HR business, versus merely being a consultant - and may now be thinking that KPMG is stealing its thunder in the space. Meanwhile, we have a whole host of feisty new-generation As-a-Service providers, such as Aason, OneSource Virtual, Meteorix and Appirio, which are unraveling their gameplans to stay ahead of this evolving space.

Consolidation is going to be the next step for many of these service providers - the brave will stave it off, some will take the exit money while they can, while there will be some legacy players who panic and make a move to stay in the race (remember those awful acquisitions during the HRO 1.0 era?). As-a-Service has arrived, and HR provides the early battleground... so sit back and enjoy the show, as this one could get messy ;)

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12 Comments

Some questions too, if relevant, also building forward from the past discussion -
Why did Towers Watson sell?
Will KPMG go the full cycle to also offer HR-BPO-transactional bits around this for clients that use their services for Workday, as the lines blur?
Where are the traditional BPO players in their endeavor to move up the chain? Don't hear Genpact anywhere in the Workday players? or are they secure as independent players?

HR/O has attracted a bunch of PE/VCs, traditional boutiques and full service players for a while now and it was touted as the next space to watch in the last decade. But since the big bad deals landed by IBM, PWC, CVG/NGA et al. a longtime ago, why has HR never realized its promise for service providers? Perhaps its time has come?

A very informative post. How do you feel the likes of a KPMG can still justify its top-end consulting margins when it comes to SaaS delivery? Isn't the whole point of SaaS to get away from costly transformation issues?

@Alan - you only need to look at the likes of Saleforce.com to see "legacy ERP" rates being charged for implementation work - and post go-live support and transformation. The reality is there is money to be made in the technology implementation (though nothing like the days of the SAP battles), but more to be made in the organizational change, workforce (and other) analytics, and bread-and-butter fulfillment work, which still (last time I checked) makes profit for services firms. What I like about this type of opportunity for the consultants is they do not have a legacy business to cannibalize - this is all green field opportunity for them. True, there is less of the legacy ERP gravy train as we have seen in years gone by, as the increased standardization is pushing the focus higher p the value chain. The service providers under threat are the legacy firms protecting obsolete technology and archaic processes, who have been used to driving the "pain dollars" out of their clients for years. I can see several of these firms just getting crushed in the next 24-36 months...

@Jeff - I imagine they want to double-down on their proprietary technology, where they can command larger returns and are leaving the SaaS suites to the IT specialists. Good for them - they have made a quick decision to exit this space as opposed to drifting around aimlessly without a concerted game-plan, like some other providers still hedging their bets. You either make real investments to support Workday, SAP, Oracle etc., or leave it up to others,

Regarding KPMG, they are committing to managed services on SaaS, namely Workday, OracleHCM and SAP Successfactors. They will undoubtedly focus on deals they know they can manage effectively, and clients they feel it worth the investment. As I laid out a few weeks ago, clients will pay when they see the value in front of their faces. BPO grew up on the sale of immediate cost reduction – a unique value sale that created the industry we are in today. However, as the labor savings run out of room, the sale has to shift to one of future ROI and value – something, let’s face it, which is very challenging for our legacy service providers and advisors to succeed at and manage. However, clients frequently pay for skillful consultants who can come in and make a difference, who will find problems and sell their capabilities to solve them to their clients. The As-a-Service value proposition is really a combo of this consultative prowess and the efficiency and simplicity of effective BPO. So, the two need to be better conjoined to grant clients what they really need. This is the real start of BPO 2.0, where technology is standard, globally accessible and the business can be moulded around an acceptable way of operating...

I'm a little perplexed by your characterization of this deal as a BPO move. The way I understand it KPMG is buying TW's Workday implementation business, along with some functional service delivery model design expertise, not getting into managed HR services. When you say BPO I think of firms like AonHewitt, Xerox, Northgate Arinso that deliver services such as payroll, ben admin, HRMS admin, etc., etc. Are you saying something different? I see this deal being more similar to Deloitte acquiring Aggressor or Aon buying OmniPoint or Kloud. What am I missing?

@Jim - KPMG has actually declared they are in the HR managed services business with this move. I agree this will be a cultural challenge for them and they will likely need further investments in delivery scale. With the increased (prolific) uptake of SaaS products like Workday, SFSF etc., these guys will eventually get squeezed out unless they can wrap service delivery capability about them. Why would you pay millions for a consultant for help with your SaaS after it's been implemented? Answer - you're probably more likely to use the firm servicing the ongoing delivery for help via a subscription / managed service model (be it a small analytics need or larger strategic help / org change validation etc) than have expensive consulting projects every time you need support. Remember, it was the big consultants who gave birth to big BPO in the 80s and 90s... this is simply the chickens slowly coming home to roost now technology is much more standardized, ubiquitous and globally accessible. Next phase will be the outsourcers in open competition with the consultants... going to be fun to watch...

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